Late Credit-Card Payments Stoke Fears for Banks

The average net charge-off rate for large U.S. card issuers—the percentage of outstanding debt that issuers write off as a loss—increased to 3.29% in the second quarter, its highest level in four years, according to Fitch Ratings.

..  If consumers’ budgets get more stretched, a pullback in spending could pressure both growth and corporate profits.

.. While losses are rising, they remain low compared with historical levels and the 10% net charge-off rate they hit in early 2010.

.. starting around 2014 many lenders loosened underwriting standards substantially, turning to subprime borrowers with lower credit scores that brought in higher yields.

.. That contributed to a new boom in credit-card spending. Card balances nationwide rose 6% over the last 12 months through May, a growth rate that is up from about 1% four years ago

.. The rising losses are occurring during a time of near record-low U.S. unemployment, which suggests that credit performance could quickly weaken should the jobs situation turn.

.. Credit cards also moved to the top of the list of concerns about potential losses in the Fed’s annual stress test of banks in June.